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If you like this commentary please visit and “Like” my Facebook page. As rates drop more prospective buyers will qualify and competition will arise for the properties for sale. I put all of my prospective buyers through underwriting so that when they place their offer, it is as close to “cash” as you can get. So to get your clients “underwriter approved”, please contact me and get your offer accepted!

The National Debt is currently: $18,157,222,132,587.00 is Higher by another 5 BILLION. The interest pay-out alone on the debt is 240 Billion per year! I post this so we will be aware of what we are leaving to our children.

Stocks edged higher this morning, putting major benchmarks on track to snap a streak of four days of losses. The Dow last traded at 17,690 about 500 pts lower than where it was last Friday. The S&P 500 is trading at 2,058. Gold is trading at $1,200 an ounce, while oil futures at $49.87 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.87/Gal.

The FNMA 30-year fixed 3.0% coupon (interest rates at which banks sell their loans into Fannie Mae), containing 3.25% – 3.625% mortgage rates, the benchmark or how rate sheets are priced these days is currently trading at 101.84 worse by .125% over where we were last week. Our current trading is about 101.00 to about 102.25. We broke above the range last Friday and traded to 102.52 but have retraced to 101.84 currently. We were just at 103.35 on Feb 1. Basically the change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the lower the rate.

In economic news this week; the reader’s digest version is the economy is still trudging along. The first quarter is showing signs of slowing as The U.S. Dollar continues to gain strength and oil remains at 25 year lows. Earlier in the week the ECB’s (European Central Bank) commitment to flood the Eurozone with more than €1 trillion ($1.16 trillion) in newly created money, sparking a rally in stock and bond markets and sending the euro plunging.

Profits at U.S. corporations in late 2014 posted their largest drop in four years, a reflection of an economy weighed down by a strong dollar and weak global demand. The Commerce Department’s third estimate of fourth-quarter gross domestic product (GDP) also showed that the economy slowed in the final months of 2014, putting the growth trajectory on a lower path ahead of an apparent slowdown early this year.

GDP, the broadest measure of goods and services produced across the economy, expanded at an annual rate of 2.2% in the fourth quarter. That was unchanged from its previous estimate last month. Corporate profits fell at a 3% pace from the third quarter. That was the largest quarterly drop in profits since the first quarter of 2011. On a year-over-year basis, the report pegged corporate profit growth at 2.9%, slowing from 5.1% annual growth in the third quarter. As a share of the total economy, corporate profits were just a hair below the record high of 10.5% set in 2013.The expectation is for the current quarter to remain sluggish. First-quarter GDP estimates have been trimmed earlier this week following a disappointing report on business spending and investment.

The great deflation of 2014 caused by the plunge in oil may have run its course: Consumer prices rose 0.2% in February, the first rise in four months. Gasoline prices have rebounded in early 2015, with the cost of oil stabilizing at around $50 a barrel after selling for more than $100 last summer. Higher costs for food, housing and new cars also contributed to the increase in consumer prices in February. Still, there’s been zero overall inflation in the last 12 months, the offshoot of the biggest drop in gasoline prices since the Great Recession. The annualized rate of consumer inflation had even turned negative in January for the first time since 2009.

If food and energy are excluded, so-called “core” consumer inflation has risen at a 1.7% rate over the past 12 months. Although the Fed uses a different index as its preferred price gauge, they view a 2% inflation as healthier for the economy. The Fed is more likely to raise interest rates if inflation starts to move steadily higher.

While Businesses are hiring at the fastest pace in 15 years, they sure aren’t investing like good times are here to stay. Orders for long-lasting or durable goods such as cars, appliances and computers fell 1.4% in February to mark the third decline in four months. The increase in orders for January was lowered, making the decline last month look even worse.Businesses started cutting investment at the end of the summer and that contributed in part to slower growth during the last months of 2015 after a very strong third quarter.

Companies are actually investing less now compared to a year earlier in unadjusted terms. A soft global economy and soaring dollar that’s made it harder to sell U.S. exports are among the headwinds that are constraining American businesses. The steep plunge in oil price has also curtailed investment in what was a booming domestic energy sector.

On the Real Estate front: The price of buying and renting a home are rising, squeezing consumers and dampening the housing market. The median sales price of used homes hit $202,600 in February, up 7.5% from the year-earlier period. This is the largest increase in a year and is “unhealthy” said Lawrence Yun, chief economist of the National Association of Realtors. While higher prices are good for homeowners, “for people who want to buy a home it is becoming more difficult,” Yun said. Wages are only rising 2%, he noted. Potential first time buyers on the sidelines, and renters are also being squeezed as rents are rising at a 3.5% rate, Yun noted. Given the rise in rents, these buyers are unable to save for down payments, Yun noted. The share of first-time home buyers rose marginally to 29% from 28% in February, well below the 40% level that the Economites say is normal.

After falling to a nine-month low in January, overall sales of existing homes rebounded partially, rising 1.2% in February. Existing home sales remain soft, having been stuck around the 5 million unit rate for two-and-a-half years.One reason prices are rising is that inventory remains low, Yun said. February’s inventory was 1.89 million existing homes for sale, a 4.6-month supply at the current sales pace. This was down 0.5% from the year-earlier period. The investor share fell to 14% from 17% also due to the higher prices, Yun said. The all-cash share of purchases slipped to 26% from 27%.

Sales of new homes in the U.S. surged in February, and home buying in the first two months of 2015 rose to the highest level in seven years despite heavy snow and bouts of extreme cold in some parts of the nation. The pace of new home sales climbed 7.8% last month to an annual rate of 539,000 from an upwardly revised 500,000 in January, the government reported. That’s how many new homes would be sold if the rate of sales for the whole year were the same as it was in February. Sales were unusually strong in the Northeast, where demand had fallen off sharply in January. Sales also climbed 10% in the South, the region in which more than half of all new single-family homes are built.

On the Employment front: The U.S. economy may have slowed sharply in the first quarter, but companies aren’t showing much concern: Layoffs remain near a 15-year low. The number of people who filed new applications for benefits at their state unemployment offices, known as initial claims, fell by 9,000 to 282,000 last week. New claims have tracked below 300,000 for three straight weeks after a weather-induced spike in February that pushed them to the highest level since last spring. And they are running about 9% lower now compared to one year ago.

Fun for the day:

Part 1 of 5 of “Where to move”…for all of those who are contemplating retirement locations.

You can retire to Phoenix, Arizona where…

1. You are willing to park 3 blocks away from your house because you found shade.

2. You’ve experienced condensation on your rump from the hot water in the toilet bowl.

3. You can drive for 4 hours in one direction and never leave town.

4. You have over 100 recipes for Mexican food.

5. You know that “dry heat” is comparable to what hits you in the face when you open your oven door.

Stocks traded slightly lower this morning, but are still on track to post their biggest monthly percentage gains since 2011. The Nasdaq is within striking distance of hitting 5000, a level last touched nearly 15 years ago. The Dow last traded at 18,155 about the same compared with where it was last Friday. The S&P 500 is trading at 2,105. Gold is trading at $1,213 an ounce, while oil futures at $49.51 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.73/Gal. That’s 0.62 cents higher a gallon in just 27 days! See below.

The FNMA 30-year fixed 3.0% coupon (interest rates at which banks sell their loans into Fannie Mae), containing 3.25% – 3.625% mortgage rates, the benchmark or how rate sheets are priced these days is currently trading at 101.81 better by 0.75 over where we were last week. Our current trading is about 101 to about 102.00. We were just at 103.35 on Feb 1. Basically the change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the lower the rate.

If you like this commentary please visit and “Like” my Facebook page. As rates drop more prospective buyers will qualify and competition will arise for the properties for sale. I put all of my prospective buyers through underwriting so that when they place their offer it is as close to “cash” as you can get. So to get your clients underwriter approved, please contact me and get your offer accepted!

In economic news this week; the reader’s digest version is the economy is still trudging along. Inflationary pressures remain tame, with spring bringing a boost to the real estate market.

The thieves are at it again! Gasoline is 0.62 cents higher per gallon over a 27 day period while oil prices have risen just $2.20 in the same period. The seasonal lift in gasoline prices remains well underway across the country, with the West Coast seeing the most excruciating rate of price increases.

Here are a few of the “excuses” I’m hearing regarding the dramatic rise. An explosion at an Exxon Mobil oil refinery in Torrance last week, California companies begin scaling back production to convert to the mandated and more expensive summer blend of fuel, California’s carbon-emissions mandate for transportation fuels has added more than a dime in costs to a gallon, and demand is starting to rise with fuel consumption reaching its highest levels since Obama entered the White House in 2008. The summerlike weather California and parts of the West have enjoyed this winter also puts more people on the road, burning more gas. So basically it’s because they can!

According to the Chicago Fed’s national activity index, the economy resumed above-trend growth in January. The indicator, a weighted index of 85 different economic reports, rose to positive 0.13 in January from negative 0.07 in December. The three-month moving average meanwhile slowed to 0.33 in January from 0.34 in December.

Consumers expressed less confidence in the economy in February, worrying a bit more about the availability of jobs and outlook for business in the months ahead. The consumer confidence index fell to 96.4 this month from 103.8 in January, the nonprofit Conference Board reported. The index topped the 100 mark in January for the first time since an economic recovery began in mid-2009, setting a seven-and-a-half-year high in the process. Consumer confidence has been climbing in fits and starts since the end of 2011, helped by a sharp pickup in hiring and, more recently, a plunge in gasoline prices.

Consumer prices fell again in January and inflation turned negative compared to 12 months ago, a reversal fueled by sharply lower oil prices that’s offered financial relief to workers and households. The consumer price index dropped 0.7% last month, marking the third decline in a row, the Labor Department reported. Over the past year prices have actually declined by 0.1%, the first time consumer inflation has been negative since the fall of 2009.

Energy prices dropped 9.7%, as the cost of most fuels including gas decreased. Food prices were unchanged. Excluding food and energy, so-called “core” consumer prices rose 0.2% in January. Core prices are also up 1.6% in the past year, mainly reflecting rising prices for housing, the single biggest expense for consumers. Real hourly wages, meanwhile, rose 1.2% in January, a combination of higher pay and lower inflation. Real hourly wages have climbed 2.4% in the past 12 months.

Federal Reserve Chairwoman Janet Yellen on Tuesday took another step closer to the first rate hike since 2006. In testimony to the Senate, Yellen signaled to financial markets the Fed would soon drop the word “patient” from its forward guidance. She softened the blow with several dovish comments that suggest no hurry about actually moving. Markets have expected that when the Fed dropped “patient” from its policy statement that it would mean that a rate hike would follow in the next couple of meetings. That interpretation came from signals Yellen sent in December.

Now, however, Yellen stressed that the Fed wasn’t on automatic pilot and only wanted the flexibility to move “on a meeting-by-meeting basis.” Several analysts said a June rate hike remains on the table if the Fed decides to drop the word “patient” from its policy statement on March 17-18.Yellen’s summation of the current economic environment suggests she is in no hurry to raise rates. “Too many Americans remain unemployed or underemployed, wage growth is still sluggish, and inflation remains well below our longer-run objective,” despite the falling unemployment rate, she said.

On the Real Estate front: Existing-home sales in January fell 4.9% in January, a larger than forecast decline, the National Association of Realtors reported. In our local El Dorado County area existing sales were down by 43% from Dec to Jan. Lawrence Yun, chief economist for the NAR, attributed the decline to a lack of housing supply and rising prices at the end of last year. The median existing-home price was $199,600, which is 6.2% above January 2014 levels. Inventory edged up 0.5% to 1.87 million homes, or a 4.7 month supply at the current sales price.

Other factoids from the January report:

• All-cash sales were 27% of all transactions, up from 26% in December but down from 33% in January 2014.

• Distressed sales were 11% of all sales, unchanged from December.

• Properties typically stayed on the market slightly longer in January (69 days) than December (66 days) and a year ago (67 days).

• The share of first-time buyers declined to 28% in January, the lowest since June.

Sales of “new” homes avoided a winter dip in January, with prospects growing for a surge in demand as spring approaches. New homes sold at annual rate of 481,000 last month, essentially unchanged from December, the Commerce Department reported. Sales were 5.3% higher in January compared to a year earlier, another signal the housing market is continuing its long, slow recovery from its worst bust ever.One worrisome sign: The median price for a new home was up 9% from a year ago, and a steady rise in prices could act as a potential drag on sales. Mortgage rates, on the other hand, have fallen back near record lows (October 2012) and lenders appear to have loosened very strict requirements on how to qualify for a loan. That could make it easier for buyers to get a mortgage and afford a home.

The housing market seems to be getting off to a great start in 2015 though with “Pending” home sales rising in January to the highest level since Aug. 2013, the National Association of Realtors reported. Its pending home sales index rose 1.7% from an upwardly revised December level, and sales were up 8.4% from Jan. 2014 levels. In our local El Dorado County area pending sales were higher by 65% from Dec to Jan. The NAR forecasts a 6.4% gain in existing home sales this year and a nearly 5% rise in median prices.

On the Employment front:The number of people who applied for U.S. unemployment benefits jumped by 31,000 to 313,000 in the seven days from Feb. 15 to Feb. 21, continuing a recent pattern of sharp up-and-down movements.

The Dow last traded at 16,947 about 200pts higher than where it was a week ago. The S&P 500 is trading at 1,962. Gold is trading at $1,314 an ounce, while oil futures at $106.62 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.79/Gal.

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 105.50 about .30 better than where we were last week. We’ve broken out of the past trading range and rates are still trending lower at this point. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; The reader’s digest version is inflation is higher, layoffs are lower, manufacturing is steady, and there were no surprises of major changes from the Fed at their regular meeting.

The Federal Reserve Bank of New York reported this week that Manufacturing activity in their “Empire State” general business conditions index basically held steady in June after hitting an almost four-year high in May. The Philadelphia Fed’s manufacturing index jumped to a reading of 17.8 in June from 15.4 in May. This is the highest reading of activity since last September.

Industrial production bounced back in May, according to Federal Reserve which also showed that April output wasn’t as bad as initially estimated. Production climbed 0.6% in May, after falling 0.3% in April and rising 0.8% in March.

Signaling that economic growth could pick up in coming months, the leading economic index for the U.S. rose 0.5% in May to 101.7, the Conference Board reported. “Recent data suggest the economy is finally moving up from a 2% growth trend to a more robust expansion,” said Ken Goldstein, economist at the Conference Board, in a statement. I want to be an economist when I grow up. They get paid to guess and whether they’re right or wrong, kind of like the weather man.

Consumer prices, CPI, rose sharply in May for the second straight month and the rate of inflation over the past year reached its highest level since late 2012, an upward trend that could worry the Fed Gods unless it pulls back soon. The consumer price index jumped 0.4% last month following a 0.3% gain in April, the Labor Department said Tuesday. Annualized over the past 12 months, consumer inflation is at 2.1%. Just eight months ago, inflation was running at just a 1% pace.

The Fed has been aiming to boost inflation to around 2% or so from what it considered an economically damaging low level, but the sudden surge could set off alarm bells. While I doubt that it will, this could cause “market” concern that the Fed might be forced to raise interest rates earlier than it planned. Excessive inflation appears unlikely in the absence of stronger growth, further tightening in labor market conditions, and greater pressure on wages. Historically speaking, on an annual basis inflation is still very low. Once annual inflation gets above 5% it becomes extremely troublesome for the economy. But with inflation so low in spite of the Fed’s efforts to print money some are saying that Deflationary forces are stronger than the Fed. Long term average inflation is about 3.2. The core CPI, which excludes volatile food and energy costs, rose by 0.3%, the biggest gain since August 2011. The cost of housing, new cars, airline tickets, medical care and prescription drugs all increased.

On the Real Estate front: Home builders’ confidence rose four points to 49 in June, the highest level in five months, but respondents were still a bit pessimistic, according to the National Association of Home Builders/Wells Fargo housing-market index released Monday. The index has been below 50 since February, indicating that builders, generally, are pessimistic about sales trends. “Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase. Builders are reacting accordingly, and are moving cautiously in adding inventory,” said David Crowe, NAHB’s chief economist. Construction on new homes fell by 6.5% in May and builders trimmed plans for future projects in another sign that a hoped-for spring revival in the housing market remains elusive.

On the Employment front:With layoffs at very low levels and more jobs available, the number of Americans seeking unemployment benefits continues to hover near a post-recession bottom. Initial jobless claims declined by 6,000 to 312,000 in the week ended June 14. Yet despite the decline in jobless claims, millions of Americans still cannot find work and the number of long-term unemployed remains higher now than at any time before the 2007-2009 recession struck. The unfinished recovery in the labor market is the chief reason why the Fed plans to keep interest rates low for the foreseeable future, a point reiterated by Chairman Janet Yellen on Wednesday after the bank’s latest gathering in Washington.

The economy has now recovered all the jobs it lost from the Great Recession. It’s only taken seven years. Industrial production is now higher. But consumer confidence is, depending on your measure, somewhere between 10% to 25% below its 2007 peak. It turns out; Fed Chairwoman Janet Yellen feels pretty much the same way as other Americans. For example, this is what the world’s most powerful central banker had to say Wednesday when asked if, finally, she’s confident the economy is running above its long-run potential. “When you say confident, I suppose the answer is no, because there is uncertainty,” she said. Yes, she continued, there’s accommodative policy from her Fed, there’s diminished fiscal drag, easing credit conditions, improving household debt finances, rising home prices, rising equity prices. But she returned to the word “uncertainty,” and it didn’t seem like just obligatory caution.

In the Fed’s statement following their meeting on Wednesday, Yellen was more kitten than lion, sticking to her guns that the central bank can hold short-term interest rates steady until the middle of next year and then raise them gradually, and downplaying recent strong inflation readings.As expected, the central bank trimmed bond purchases by another $10 billion, staying on track to end its long-running stimulus program before the end of the year. This is the fifth straight meeting with a $10 billion cut in the asset purchases. The Fed will now buy $35 billion a month in Treasuries and mortgage-related assets, starting in July.At the same time, the Fed lowered its forecast for “longer run” interest rates to 3.75% from closer to 4%. The last change is important because it signals the central bank won’t push up interest rates all that high during this recovery phase.

The Dow last traded at 16,667 right about where it was a week ago. The S&P 500 is trading at 1,917. Gold is trading at $1,245 an ounce, while oil futures at $102.64 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal.

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 105.80 about .30 better than where we were last week. We’ve broken out of the past trading range and rates are still trending lower at this point. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; “Economics: The science of explaining tomorrow why the predictions you made yesterday didn’t come true today.” The reader’s digest version is the economy is plugging along, the economy contracted in the first quarter for the first time in three years, Consumer confidence is a bit higher, home prices are higher,

Millennials are going to make major shifts in corporations over the next decade and most people aren’t ready for the amount of change that’s coming. By 2025, Millennials will account for 75% of the global workforce and by next year, they will account for 36% of the American workforce. At some companies like Accenture and Ernst & Young, they already account for over two thirds of the entire employee base. The Millennials like the Baby Boomers are very likely to shape many things to come just as their parents did. To be continued…

The largest Navy ship-building contract ever boosted orders for durable goods in April, but demand for long-lasting civilian items such as personal computers and appliances slowed a bit after surging in the prior month. Orders for long-lasting goods rose 0.8% in April, propelled by the biggest burst of orders for defense equipment since December 2012. The Navy placed a $17.6 billion order in late April for 10 nuclear-powered submarines. Are the ones we have wearing out or are we planning an invasion somewhere? The durables report is often quite volatile and subject to large revisions. Business investment has repeatedly faltered since the recovery began in mid-2009 and the question in whether companies are ready to sustain a faster pace of spending after years of frugality.

The economy contracted in the first quarter for the first time in three years, hampered by harsh weather that disrupted business and slowed construction. Yet the damage seems to be fading fast amid widespread signs that growth has accelerated in the spring. Gross domestic product, or GDP, the sum of all goods and services produced by the economy, shrank by annual pace of 1% in the first three months of 2014, the Commerce Department said. Initially the government had reported last month that GDP rose at 0.1% rate. GDP is anticipated to snap back with a 3.8% gain.

The Conference Board said its consumer confidence index in May rose to 83 from 81.7 in April. Both the present situation and future expectations indices also advanced. While there is a real pickup in consumer confidence, six years out from “the Great Recession,” sentiment is still at very weak levels. Those who plan to buy a home within six months fell to 4.9% in May, the lowest since July 2012; that compares with a percentage of 5.6% in April and as high as 7.4% in December.

Consumer spending slipped 0.1% in April, the first decline in a year, as we cut back on car purchases and spent less on utilities such as natural gas and electricity as the weather warmed up.Just one month earlier, consumer spending jumped by a revised 1%, reflecting the largest increase since 2009. A large chunk of the increase in spending in March, and most of the decline in April, was tied to changes in what we paid for utilities. We spent less to heat and power our homes in April than we did in March.

Personal incomes, meanwhile, rose 0.3% in April. Adjusted for inflation, disposable income rose 0.2% last month. Disposable income is mainly the money left over after taxes and an increase typically foreshadows an rise in consumer spending. Yet over the past 12 months disposable income has risen just 2%, a rate that needs to rise if the economy is going to grow much faster.

On the Real Estate front: Home prices rose 0.9% in March, the first increase in five months, but annual growth is slowing down a bit. Including March’s gain, prices across the 20 cities were still about 19% below a 2006 peak. Year-over-year home prices were up 12.4% in March. Going forward home prices are expected to continue to slow down as inventories expand. Both the number of new single-family homeson the market, as well as existing homesavailable for sale, rose in April, according to reports released last week. Here locally inEl Dorado Hills, Cameron Park and Shingle Springs as far as new listings go this month May 1 through 29 we had 139 new listings. Current inventory is 336 homes listed for sale (per MLS). Last year in the same time period there were 201.

The National Association of Realtors reported that pending home sales rose 0.4% in April, the second consecutive gain after slumping since the summer, signaling that sales of existing homes may pick up. The index of pending home sales hit 97.8 in April compared with 97.4 in March. Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence. Despite April’s gain, the gauge was down 9.2% from a year earlier, hit by few homes available for sale and pricier properties. An index reading of 100 equals 2001’s average contract activity level. Here locally pending sale increased 9.8% from March to April.

On the Employment front:The number of people applying for unemployment benefits sank last week to the second-lowest level since the recession ended in mid-2009, suggesting continued improvement in a labor market that’s perked up in the early spring. Initial jobless claims fell by 27,000 to 300,000 in the week ended May 24, the Labor Department saidThursday.

The National Debt is currently: $17,528,071,962,587.00 is higher by about 8 BILLION. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,606 right about 175 points higher than where it was a week ago. The S&P 500 is trading at 1,900. Gold is trading at $1,292 an ounce, while oil futures at $104.39 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal.

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 105.53 about .20 better than where we were last week. We’ve broken out of the past trading range and rates are still trending lower at this point. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; The reader’s digest version is the economy is plugging along, existing home sales are positive, and the Fed Gods are at the podium again.

Ninety percent of Millennials frequently used the internet to search for homes compared to less than half of Silent Generation buyers. Younger generations of buyers were also more likely to find the home they purchased through the internet; older buyers most often learned about the home they purchased from their real estate agent.The Millennials like the Baby Boomers are very likely to shape many things to come just as their parents did. To be continued…

The Fed Gods examined “several approaches” for the eventual tightening of monetary policy but only decided to be flexible, according to the minutes from the April meeting released Wednesday that suggested that the time for higher interest rates is drawing closer. They emphasized the need for base decisions on experience because of the unprecedentedly large size of the central bank’s balance sheet. According to the minutes, a number of Fed officials said it would be important for the Fed to “communicate still more clearly about the Fed’s policy intentions as the time of the first increase in the federal funds rate moves closer.” Several of the Fed Gods were at the podium this week speaking on the very same topic.

Charles Plosser, president of the Philadelphia Fed. In a speech Tuesday in Washington said “The U.S. economy is likely to grow at an accelerating pace in the second half of 2014 and into next year, possibly requiring the Federal Reserve to begin raising interest rates sooner rather than later.” Plosser reaffirmed his view that the economy will continue to strengthen over the next year. He said a more rapid pace of hiring might lower the unemployment rate, now at 6.3%, below 6% by the end of 2014. He also said he’s optimistic the housing market will bounce back after a recent drop in sales.

William Dudley, the president of the New York Fed, told the New York Association for Business Economics that “The Federal Reserve will take its time lifting interest rates” and that that there will be “a considerable period of time” between the end of its asset purchases (in the fall, he says) and the first rate hike. He said the trajectory of hikes will “probably be relatively slow” – but that depends both on how the economy perform and how financial conditions respond to tightening. He expects the level of rates over the longer-term to be “well below” the historical average of 4.25%.

Fed Chairwoman Janet Yellen on Wednesday delivered what you’d expect from a commencement speech: graduates, she said, should “tend the fires of curiosity,” listen to others, and show grit in the face of failure. Yellen reminded New York University students in Yankee Stadium that even Babe Ruth, Lou Gehrig and Joe DiMaggio failed most of the time they stepped to the plate, according to a text of her remarks.

The leading economic index (LEI) rose 0.4% in April to 101.4, the Conference Board reported. “Despite a brutal winter which brought the economy to a halt, the overall trend in the leading economic index has remained positive,” said Ken Goldstein, economist at the board.

Economic growth moderated in April, according to the Chicago Fed national activity index released Thursday. The index fell to negative 0.32 in April from positive 0.34 in March. However, the three-month average rose to 0.19 from 0.04 in March — the highest level since November 2013. The index is a weighted average of 85 different economic indicators, designed so that a reading of zero is equivalent to trend growth. When the three-month average exceeds 0.7, there’s an increasing likelihood of sustained increasing inflation, and when it’s below negative 0.7, there’s an increasing likelihood a recession has begun.

U.S. manufacturing picked up in May, according to the purchasing managers index released by Markit on Thursday. The manufacturing PMI rose to 56.2 compared to the 55.4 in April. Readings over 50 indicate growth. Readings for new orders, new export orders and employment expanded at a slower pace than April. Basically this means that manufacturing is at an even pace barely exceeding growth numbers.

On the Real Estate front: Sales of existing homes rose 1.3% in April to an annual rate of 4.65 million, the National Association of Realtors reported. Details of the report contained at least two nuggets that may bode well for future sales. One, the number of existing homes on the market is rising, a trend that will give buyers more choice and support sales. Inventories jumped almost 17% in April. Two, home-price growth is slowing, which may make would-be buyers more comfortable with entering the market. The median sales prices for existing homes hit $201,700 in April, up 5.2% from a year earlier supported by low inventory. Last year, price growth was in the double digits. This isthe first crucial sign that the housing recovery, which had essentially stalled during the past nine months, may be on the verge of a rebound.

On the Employment front:New applications for unemployment benefits rose in mid-May, reversing a big drop earlier in the month that put initial claims at a seven-year low.The number of people who applied for new benefits climbed by 28,000 to 326,000 in the week ended May 17. I guess they just waited a week.

The Dow last traded at 16,437 right about where it was a week ago. The S&P 500 is trading at 1,870. Gold is trading at $1,293 an ounce, while oil futures at $102.09 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal.

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 105.35 about .20 better than where we were last week. We’ve broken out of the past trading range and rates are still trending lower at this point. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; The reader’s digest version is the economy is showing signs of improvement, not great but improvement. Inflation is on the rise, retail sale is slightly higher, small business sentiment is higher while consumer sentiment is lower, manufacturing activity appears to be growing at a moderate pace, home building has slowed and employment is improving.

The government recorded a budget surplus of $107 billion in April. The surplus for April is $6 billion, or 5%, lower than in April 2013. April is usually a surplus month, as Treasury sees a spate of tax payments from individuals and corporations. Though smaller than last year’s, the April surplus contributes to a steady decline in the deficit for fiscal 2014. For the first seven months of the fiscal year that began Oct. 1, the deficit is $306 billion. That is $181 billion, or 37%, lower than it was for the same period in fiscal 2013. In April, the government spent $307 billion and took in $414 billion.

Wholesale prices climbed 0.6% in April, marking the second straight big gain in a government index that underwent a major overhaul at the start of the year. Excluding the volatile categories of food, energy and trade, core wholesale prices rose a smaller 0.3% last month, the Labor Department reported. Personal consumption, a new index designed to foreshadow changes in the consumer price index, rose 0.7% in April. Over the past year overall producer prices have risen 2.1%, up from 1.4% in March and just 0.9% in February. The unusually sharp increase in such a short period raises questions about the usefulness of the fresh-look PPI index, at least in the short term.

Consumer prices posted the biggest increase in April since last summer as the cost of many staples rose, making it harder for Americans to stretch their paychecks to pay for typical household expenses. The consumer price index jumped 0.3% last month to mark the largest gain since June, the Labor Department said. As a result, real inflation-adjusted hourly wages decreased 0.3% in April to mark the biggest decline in 14 months. Over the past 12 months real hourly wages have actually fallen 0.1%, the first negative reading in two and a half years.The yearly pace of inflation rose to 2% in April from 1.5% in the March.

Excluding the volatile food and energy categories, core consumer prices increased 0.2%. The core rate has risen 1.8% in the past 12 months, and it’s been stuck between 1.6% and 1.8% for more than a year. The core rate is viewed as a more useful gauge of underlying inflationary trends, but it remains well below the level the Federal Reserve considers harmful to the economy.

Americans apparently shopped less in April after splurging in March, with retail sales rising a scant 0.1%. The increase in March was originally reported as 1.1%. Excluding the auto sector, retail sales were unchanged. So-called core or control group sales fell 0.2%. That category strips out cars, gasoline and building materials and gives a better sense of retail-sales trends. Retail sales account for about one-third of consumer spending, the main conduit of economic activity. In the past 12 months, retail sales have risen 4%, about two-thirds the historic average. The latest retail report includes the government’s annual benchmark revisions meant to provide more accurate data.

Small-business sentiment in May rose to the highest level in more than six years, the National Federation of Independent Business said Tuesday. Its small-business optimism index rose 1.8 points to 95.2, the first time it’s surpassed the 95 level since Oct. 2007. There were gains in seven of the 10 components, notably a 9-point jump in those who expect the economy to improve.

The preliminary May reading of the University of Michigan and Thomson Reuters consumer sentiment index fell to a reading of 81.8, down from 84.1 in April.

Manufacturing activity appears to be growing at a moderate pace in the second quarter, according to three separate readings released Thursday. The most upbeat indicator was a survey of manufacturers in the New York, which hinting that business owners were less melancholy about the outlook. After barely expanding in April, the Empire state index shot up to 19.0 in May, its highest level since mid-2010, according to a report released by the New York Federal Reserve Bank.

Two other indicators were not as rosy but economists argued that they also hinted at future strength in the sector. The Philadelphia Fed’s manufacturing index retreated slightly to a reading of 15.4 in May from a 16.6 reading in April. The drop in the Philly Fed index retraces only a small part of the sharp gain in April. The index was 9.0 in March.

The Empire State and Philly Fed data are closely watched because they are one of the first readings of the health of the manufacturing sector in May. The softest report was the industrial output data for April released by the Federal Reserve , that showed a 0.6% drop in April. But that came after strong gains in February and March.

On the Real Estate front: Home builders are the most pessimistic they’ve been in a year, with makers of new single-family homes reporting fewer sales. The housing-market index for builder confidence declined to 45 this month, the lowest reading since May 2013, from 46 in April, the National Association of Home Builders/Wells Fargo reported. The index has been below 50 since February, indicating that builders, generally, are pessimistic about sales trends.

While the Overall construction starts on U.S. homes, including apartments rose 13.2%, the fastest pace in five months, according to the U.S. Commerce Department, that jump was led by apartments, as starts for single-family homes only nudged higher. Starts for single-family homes eked out just a 1% gain in April.Data for building permits, which are an indicator of future projects, also indicated that demand for apartments, not single-family homes, is driving growth.

Just last week, Federal Reserve Chairwoman Janet Yellen expressed caution about the housing market. “Readings on housing activity, a sector that has been recovering since 2011, have remained disappointing so far this year and will bear watching,” she told U.S. lawmakers. “The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.” “The U.S. economy has come far since the deths of the financial crisis but “we have further to go to achieve a healthy economy,”

The good news is that some headwinds for the housing market are abating. Mortgages rates, for example, have declined in recent weeks. Home-price growth is slowing down. And employers are picking up the pace of hiring.

On the Employment front:The number of Americans who applied for unemployment benefits declined by 24,000 falling sharply for the second straight week, touching the lowest level since May 2007, but at least part of the drop probably stemmed from lingering seasonal affects tied to a late Easter holiday. It looks as though Small business is leading the way in hiring as a little more than half of the net number of jobs created since employment began growing in 2010 has been generated by firms with fewer than 250 employees.

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The National Debt is currently: $17,574,181,702,957.00is higher by about 28 BILLION. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,089 about 400 pts. lower than where it was last Friday. The S&P 500 is trading at 1,826. Gold is trading at $1,318 an ounce, while oil futures at $104.17 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.75/Gal.

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 104.65 about .50 belter than where we were last Friday at this time. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; The reader’s digest version is consumer credit is rising, small business optimism is on the rise, the Federal budget (although not balanced and bleeding cash) is getting smaller, our local real estate market is heating up, and employment looks to be improving.

Consumer Credit climbed 6.4% or $16.5 billion in February, mainly due to college loans and auto purchases as reported by the Fed Gods. Consumer credit rose 5.3% in January, 7.0% in December and 5.5% in November. Consumer debt has risen every month since August 2011. Non-revolving credit such as federal student loans jumped 10.1%, or $18.9 billion, in February. Credit-card debt fell by 3.4%, or $2.4 billion. That’s the second straight decline in credit-card debt. Credit card debt has barely risen since 2010, but non-revolving loans have jumped nearly 26% since then.

A measure of small-business optimism improved in March but still didn’t surpass January levels. The National Federation of Independent Business said its small-business “optimism” index rose 2 points to 93.4, helped in particular by those who expect real sales to be higher. The best component, at positive 24%, is “plans to make capital outlays,” and the worst component, at negative 24%, is “earnings trends.”

The Fed Gods apparently had a secret video conference call in early March and reached a general consensus that the 6.5% unemployment rate threshold for the first rate hike was outdated. A summary of the video conference was included in the minutes of the Fed’s March 18-19 meeting released by the Fed. The Gods were clearly worried that changing the forward guidance would impact markets. They noted that, going into the video conference, the Fed and the markets were on the same page about the outlook for short-term interest rates.

After the meeting, the Fed policy committee statement took out any reference to an unemployment rate of 6.5% as a possible threshold to consider raising short term rates. Instead, the Fed said it will “take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments” before deciding to raise short-term rates.

The U.S. budget deficit narrowed sharply in March, the Treasury Department reported, as tax receipts climbed and government spending fell broadly. The government’s shortfall was $37 billion, down 65% compared to the March 2013 deficit of $107 billion. The government’s deficit has been steadily improving. With the March figures, the shortfall for the first six months of the 2014 fiscal year is $413 billion. The year-to-date deficit is down 31% from the same period a year ago.

U.S. producer prices, or inflation at the wholesale level, rose 0.5% in March at the fastest rate in nine months, owing largely to higher costs experienced by clothing retailers, grocers and wholesalers of chemical goods. That’s the largest increase since last June and surpassed the 0.1% estimates. The wholesale cost of services surged 0.7%, the biggest spike in more than three years, to push the index higher. Excluding the volatile categories of food and energy, so-called core producer prices jumped 0.6% last month. The spike in prices pushed the year-over-year increase in wholesale costs to 1.4% from just 0.9% in February. That’s the highest rate since last August.

A gauge of consumer sentiment is the highest in nine months, with sunnier views on both current and upcoming economic conditions, according to data released this morning. Markets watch sentiment levels to get a feeling for the direction of consumer spending. The overall consumer-sentiment gauge from the University of Michigan and Thomson Reuters rose to a preliminary reading of 82.6 in April, the highest since July, from a final March level of 80. For context, the gauge average is 86.9 over the year leading up to the start of the recession.

On the Real Estate front: Local data (El Dorado Hills to Placerville) is out for the month ending March 14th. New Listings are up 39% from February, up 206% from December, and 10% from 1 year ago. Homes currently for sale are up 7% from February, up 10% from December, and 36% from 1 year ago. Pending Sales are up 54% from February, up 100% from December, and 1.8% from 1 year ago. The Average price per square ft. is up 4.4% from February, up 5.8% from December, and 17% from 1 year ago. The average “days-on-market” is currently 67 from 74 in February. The average “months-of-inventory” is down to 3.4 from 4.5 last month. The median sold price was higher by almost 15% from February and almost 20% higher than last year at this time. What does this mean for our real estate market you ask? Well, prices are on the rise, more homes are being listed/sold, and more buyers are entering into contract. Our market is heating up!

On the Employment front: Job openings at U.S. workplaces rose to 4.17 million in February, the most in just over six years, from 3.87 million in January. Compared with same period in the prior year, February job openings rose 4%, as private-sector openings increased 5% to 3.78 million, and government positions declined. With 10.46 million unemployed people in February, there were about 2.5 potential job seekers per opening, below January’s ratio of 2.6. In February 2013, there were 12.05 million unemployed people, about 3 potential seekers per opening. When the recession began in December 2007, there were less than two potential job seekers per opening.

Once older workers lose a job, they face steep obstacles in getting rehired, and equally difficult financial challenges in managing a bout of long-term unemployment, including the prospect of never working again. On average, workers age 55 and up were unemployed for 45.6 weeks, compared with 34.7 weeks for workers younger than 55, according to AARP’s analysis of Bureau of Labor Statistics data from February.

The number of people who applied for U.S. unemployment benefits last week fell to a nearly seven-year low of 300,000, a sign the labor market might be experiencing a spring revival. Initial claims ended April 5 sank by 32,000 from a revised 332,000 in the prior week. The last time claims were that low was in May 2007, six months before the Great Recession began.